Towers Watson: Young drivers are leading the charge for UBI programs

Millennials now outnumber Baby Boomers in the U.S. and are far more diverse, according to the U.S. Census Bureau. The buying behaviors and expectations of this rising demographic will require a complete rethink by both auto insurers and car manufacturers. Companies that are not already embracing new technology will need to adapt for younger drivers who rely heavily on their smartphones and the Internet. Most Millennials surveyed (92%) own smartphones, compared with 58% of all other survey participants.

This openness to newly available and accessible technology may explain why Millennials are much more interested in a UBI policy (88% interested or maybe), compared with 74% for other survey participants. The interest increases dramatically for both groups if premiums don’t increase (93% for Millennials and 85% for others) (Figure 1). In fact, it’s fair to say that Millennials are not only open to UBI, but actually prefer it to traditional ways of calculating their auto insurance premium. By far, young drivers prefer UBI (72%) to traditional premium calculation factors like age, gender and credit score, compared to 51% of other age groups surveyed. And overall, 56% of participants expressed interest in using a device or app to see their discount before buying a UBI policy.

What’s Most Important to Millennials?

Millennials’ acceptance of new business approaches and familiarity with technology was apparent throughout the survey. For instance, Millennials are much more likely to avail themselves of rideshares or short-term automobile rentals. They are far more likely to use rideshare companies (32% from daily to frequently) than all other participants (6%). In fact, 85% of all other consumer participants never use rideshare companies, nearly double what Millennials report (43%). Similarly, Millennials are more amenable to car sharing or short-term car rentals (29% from daily to frequently) than other participants (3%). Again, Millennials were far less likely to respond “never” (48%) than consumer participants of other age groups (88%).

When a consumer is willing to buy a UBI policy, any type of technology has a high acceptance rate, but Millennials are even more comfortable with technology. For instance, they are also more willing to participate in UBI by downloading a new smartphone app (92% versus 81%) or through an existing app (88% versus 81%), or through a car navigation system device (90% versus 83%) than their other survey counterparts.

Millennials’ interest in UBI goes beyond simply an interest in new technology. They are more willing to change how they drive for a discount. Of Millennials open to UBI, 84% would change their driving behavior, compared to 53% of all others. The behaviors most likely to be changed were sticking to the speed limit (42%) and keeping a safe distance from the preceding vehicle (35%). More generally, an overwhelming 84% of respondents think that careful driving is a fair measure for applying a discount; 83% cited the importance of reducing accidents by helping people to drive more safely as the reason why they find UBI valuable.

Millennials are also more willing to pay for value-added services enabled by UBI technology, such as automated emergency response. Ninety percent of Millennials willing to buy a UBI policy said they would pay at least $45 per year for these benefits, compared to 65% of others surveyed (Figure 2).

Consumer survey participants across all age groups who would buy or consider a UBI policy ranked the three services they’d find most attractive bundled with UBI as: theft tracking (87%), automated emergency call (86%) and breakdown notification service (83%). Respondents with children also saw real value in UBI, citing as very valuable the ability to be informed about a child’s accident (77%), have emergency services dispatched automatically in the event of an accident (73%) and the ability to prevent texting while driving (69%).

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